Learn how Disney and George Lucas handled negotiations over Star Wars and why building trust in bargaining scenarios is key to successfully negotiated agreements

What is negotiation in business? Negotiation research has identified it as a process of building trust at the bargaining table while using effective strategies to create, and claim, more value out of the negotiation for both parties. Back on October 30, 2013 the Walt Disney Company made a bold leap into the world of fantasy movies with its surprise announcement that it was acquiring Lucasfilm, home of the immensely successful Star Wars brands, from its founder, George Lucas, for $4.05 billion, split evenly between stock and cash. They underwent negotiations with Lucas, who is the sole shareholder of his company.

Negotiation in Business: How to Build Trust with your Counterpart

The acquisition bolsters Disney’s status as a leader in animation and superhero films, the New York Times reports. Disney purchased Marvel Entertainment for $4 billion in 2009 and Pixar Animation Studios for $7.4 billion in 2006. It also gave Disney the opportunity to reap huge earnings from the already highly lucrative Star Wars media and merchandising empire.

Since becoming Disney’s CEO in 2005, Robert A. Iger has aggressively expanded the company beyond its traditional niche in animated films for young children and theme parks. Iger has arranged to transition from CEO to a lesser role with Disney in March 2015.

Fans of the Star Wars franchise – known for their loyalty and zealotry – were thrilled by Iger’s announcement that Disney would begin producing and releasing new films in the Star Wars franchise every two or three years. The acquisition even included a detailed script treatment for the next three Star Wars films.

In addition to the Star Wars brand, Lucasfilm gave Disney the rights to the Indiana Jones franchise and Industrial Light and Magic, Lucas’s special-effects company. But Disney’s chief financial officer told the Times that Disney’s financial calculations behind the purchase were almost based entirely on the future earnings of the Star Wars series, which is already represented in Disney’s theme parks.

This deal offers further confirmation of Disney’s willingness to make bold bids to expands its big-ticket content. Its $4 billion deal with Marvel paid off almost immediately with film hits such as Marvel’s The Avengers, which grossed $1.5 billion worldwide.

Lucasfilm’s merchandise licensing revenue currently comes primarily from toys sold in North America. Disney is planning to expand the licensing business to international markets.

The 68-year-old Lucas stepped down as head of his company and serves as a consultant as it joins Disney. Lucas decided to sell his company after beginning to plan his retirement several years ago. In a past interview with the Times, Lucas revealed that he was tired of the pressure of living up to the expectations of Star Wars fans.

“Why would I make any more [films] when everybody yells at you all the time and says what a terrible person you are?” he said.

According to Iger, he and Lucas conducted the negotiations personally, beginning early in 2011. Speaking of Lucas’ decision to hand over his creative legacy to Disney, Iger acknowledged to the Times, “There was a lot of trust there.”

One Response to “The Star Wars Negotiations and Trust at the Negotiation Table”

Ultimately though the “treatments” provided by Lucas were ignored and completely new stories were developed which has left Lucas angry as shown in numerous recent news articles. So did Iger just ask for the treatments to make Lucas “think” they wanted his inputs, knowing full well Disney was going to do whatever it pleased?

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Preparing for Negotiation

Understanding how to arrange the meeting space is a key aspect of preparing for negotiation. In this video, Professor Guhan Subramanian discusses a real world example of how seating arrangements can influence a negotiator’s success. This discussion was held at the 3 day executive education workshop for senior executives at the Program on Negotiation at Harvard Law School.

Guhan Subramanian is the Professor of Law and Business at the Harvard Law School and Professor of Business Law at the Harvard Business School.